Volume 19, Edition 7

Hot enough for you? We are all in hiding out on the Jersey Shore trying to get away from this brutal heat wave. Hope you are finding a way to keep cool and enjoy the summer. Things should be quiet as so many folks head out for vacation. The number of out of office responses to the Bits and Pieces in the summer is astounding. I wonder if anyone is working these days.

This month we report:

UNIFIED REGISTRATION SYSTEM – For months we have been reporting on the anticipated arrival of the final stage of the new online registration system. We can stop worrying, at least for a while. The FMCSA is delaying implementation of the final stage of its new online registration system until early next year. The URS, has been delayed until Jan. 14, 2017, with a new full compliance date of April 14, 2017. To date, the agency has issued 62,000 USDOT numbers, removed 340,000 dormant USDOT numbers from agency databases, and screened 100 percent of operating authority applications for reincarnated carriers.

NATIONAL HIGHWAY TRAFFIC SAFETY REPORT – The NHTSA has reported that more than 35,000 people were killed in motor vehicle traffic-related incidents this past year, a 7.7 percent increase from 2014. NHTSA’s data reveals nine of 10 regions experienced an increase in traffic deaths in 2015. Region 6 – Louisiana, Mississippi, New Mexico, Oklahoma and Texas – had the only decrease (1 percent) in traffic deaths. Region 10 – Alaska, Idaho, Montana, Oregon and Washington – experienced the largest increase at 20 percent. The largest increases by “person type” came from pedestrians and bicyclists at 10 percent and 13 percent respectively. Among crash types the largest increase involved young drivers (15 to 20 years old). Passenger vehicle rollovers went up 5 percent, and crashes involving large trucks were up 4 percent. Vehicle miles traveled in 2015 went up 3.5 percent, an increase of 107.2 billion miles.

MOTOR CARRIER BANKRUPTCIES – Once again we remind you that looking at a motor carrier’s financial reports is critical to understanding its operations and insuring strong risk selection. Avondale Partners reports that in the second quarter, 120 trucking companies ceased operations, with an average fleet size of 17 tractor-trailers. This is a 70% increase from 2015. The failures are asserted to be based upon rising fuel prices and weak demand.

TOW COMPANIES – In our continuing effort to keep you advised of issues regarding tow companies, the Connecticut Supreme Court recently held that the state may regulate the fees that towing companies charge for nonconsensual towing and recovery services. The Court held that tow companies can be regulated for services provided both before and after tow, which would include storage fees. Good for motor carriers and insurers alike.

FMCSA LEADER – T.F. “Scott” Darling has finally been given the title of administrator of the FMCSA having held the spot temporarily for the last two years. His nomination had been pending since August 5, 2015.

FAST ACT CHANGES – The FMCSA has moved forward to comply with some of its many mandates from the FAST Act. According to FMCSA, the regulations were non-discretionary and did not require the rulemaking process. The new rules are:

Section 5206: Applications for exemptions

Section 5206(a)(3) of the FAST Act resulted in a change to Section 381.300(b) — allowing exemptions for up to 5 years that may be renewed for subsequent periods of up to 5 years.

Section 5206(a)(3) also permits an applicant whose application for exemption has been denied to resubmit the application addressing the reason for denial. As a result, FMCSA added a new Section 381.317 describing this process.

Section 5206(b)(1) made permanent the following three existing exemptions from the 30-minute rest break requirements in Section 395.3(a(3)(ii):

ready-mixed concrete delivery vehicle,

transportation of bees, and

transportation of livestock while the livestock.

Section 5507 – Electronic logging device requirements

Section 5507 of the FAST Act provides an exception for motor carriers transporting a motor home or recreation vehicle trailer in a driveaway-towaway operation, as defined in 49 CFR 390.5. Under this provision, a motor carrier could comply with the hours-of-service (HOS) requirements by using either a paper record of duty status form or an electronic logging device.

Section 5518 – Covered farm vehicles

FMCSA revised Section 390.39(b)(1) to clarify a mandate that addressed exemptions found in state laws for covered farm vehicles. Exemptions include commercial driver’s licensing (CDL), DOT drug and alcohol testing, medical qualifications, HOS, and vehicle inspections. Such exemptions may not be taken into consideration during federal grants management.

Section 5519 – Operators of hi-rail vehicles

For the commercial motor vehicle (CMV) driver of a hi-rail vehicle who is subject to the HOS regulations in 49 CFR Part 395, section 5519 of the FAST Act provides that the maximum on-duty time under Section 395.3 shall not include certain time in transportation to or from a duty assignment.

The FAST Act amends the definitions for the transportation of construction materials and equipment appearing in the Motor Carrier Safety Improvement Act of 1999, including increasing the distance to a 75 air-mile radius of the normal work reporting location of the driver. The Act also allows a state to establish a different air-mile radius limitation if such limitation is between 50 and 75 air-miles and applies only to movements that take place entirely within the state.

Section 5524 –Welding trucks used in the pipeline industry

The FAST Act defines a welding truck used in the pipeline industry as a pick-up style truck, owned by a welder, equipped with a welding rig that is used in the construction or maintenance of pipelines, and that has a gross vehicle weight and combination weight rating and weight of 15,000 pounds or less.

The operator of such a vehicle and the operator’s employer are exempted from any requirement relating to registration as a motor carrier, driver qualifications, driving a CMV, parts and accessories and inspection, repair, and maintenance of CMVs, and HOS of drivers. To reflect this section of the FAST Act, FMCSA added the specific exemptions in each of the parts affected.

Section 7208 – Hazardous materials endorsement exemption

The Act allows a state, at its discretion, to waive the requirement for a holder of a Class A CDL to obtain a hazardous materials endorsement to transport 1,000 gallons or less of diesel fuel. A state may waive the requirement if the license holder is 1) acting within the scope of the license holder’s employment as an employee of a custom harvester operation, agrichemical business, farm retail outlet and supplier, or livestock feeder; and 2) is operating a service vehicle that is transporting diesel in a quantity of 3,785 liters (1,000 gallons) or less and that is clearly marked with a “flammable” or a combustible” placard, as appropriate. FMCSA adds a new paragraph (i) to Section 383.3 to reflect this exemption.

If a state exercises this discretion, a driver may still be required to obtain a hazardous materials endorsement if he or she travels to a state that has not opted to waive the requirement.

CSA CHANGES – The FMCSA proposes to develop and implement a demonstration program to decide if preventability determinations on certain types of crashes are effective. The program will have an impact on the motor carriers’ CSA Crash Indicator BASIC. The pilot program would consider a crash as not preventable if the commercial motor vehicle (CMV) was struck by a motorist who was convicted of one of the following four offenses or a related offense:

Driving under the influence;

Driving the wrong direction;

Striking the CMV in the rear; or

Striking the CMV while it was legally parked.

In addition, the agency indicated that animal strikes and suicide through a CMV would also be included in the list of possible scenarios to have a crash removed from the SMS. Based on on FMCSA approved decision maker, the review would result in one of three dispositions: not preventable, preventable, or undecided. In the case of undecided, the documentation submitted was inconclusive, and the safety event remains in the SMS data.

CASES:

AUTO:

The trip specific analysis in determining the application of the MCS-90 to a particular accident was accepted by the Supreme Court in Connecticut. The Court determined that when the accident occurred during a purely intrastate transport recovery would not be had under the endorsement. Plaintiff’s argument that the transport of truck parts which would ultimately be put in a truck to be used in interstate transport was insufficient to establish interstate transport. (Martinez v. Empire Fire & Marine Insurance Company, 2016 WL 3615693)

The Court of Appeals in Texas upheld a jury verdict against a driver and his employee which included both actual and exemplary damages. The Court found that the evidence was legally and factually sufficient to support a finding of gross negligence. While the Court held that the point where the history of log-book violations rises to the level of clear and convincing evidence to support a grossly negligent entrustment finding is very high. They concluded that there was evidence that the driver had a substantial history of driving in excess of the federal driving limits, (2) that the motor carrier knew that history and, therefore, knew that the driver was at risk of driving while fatigued, (3) that the motor carrier was “able to anticipate that an injury would result as a natural and probable consequence of the entrustment,” and (4) that, despite that knowledge, it made the conscious decision to violate its own work place rules. (Rayner v. Dillon, 2016 WL 3797893)

An odd issue was addressed by the Western District in Pennsylvania this month. There was a coverage issue involving various insurers and defense and indemnity obligations for the trucking company involved in the accident. One insurer, who elected not to be part of a mediation process, refused to consent to dismissal of the case when it was settled by the other parties at mediation, instead seeking costs. The Court held that it would dismiss the action and not allow the remaining insurer to seek fees and cost concluding that there was lack of support for a conclusion that the insurer was improperly kept in the case. (Maxim Crane Works v. Smith Transportation Services, 2016 U.S. Dist. LEXIS 95598)

The District Court in North Carolina agreed that a claim for negligent hiring, supervision and retention would not stand against a motor carrier who had conceded vicarious liability for the acts of the driver. (Turner v. USA Logistics, 2016 U.S. Dist LEXIS 86106)

CARGO:

The District of New Jersey dismissed, without prejudice, plaintiff’s complaint for compensatory and punitive damages arising from the delay in delivery of Christmas trees which were damaged by the time of delivery. The Court concluded that all causes of action were completely preempted but allowed plaintiff an opportunity to amend. (Rising Up Garden Center v. Online Freight Services, Inc., 2016 WL 3546582)

The District in Florida denied a request for a new trial or judgment NOV awarded against the defendant. The Court held that the evidence supported the conclusion that the broker acted as a carrier allowing the jury verdict to stand. The defendant’s argument that plaintiff had not established a prima facie case as to the condition of bags of coffee also failed. The Court held that the coffee was transported in thick burlap bags of consistent weight, color, smell, and marks, concluding that the coffee was distinguishable and recognizable at the point of loading, and therefore qualified as unsealed. That together with other circumstantial the evidence established good order at origin. (National Union Fire Insurance Co. v. All American Freight, 2016 WL 3787638)

The Western District in North Carolina denied defendant’s motion to transfer venue in a Carmack complaint. The Court held that the Carmack Amendment only allows, but does not mandate, that actions be brought against the carrier alleged to have caused the loss or damage, in the judicial district in which such loss or damage is alleged to have occurred. Plaintiff’s choice of venue was allowed. (Landstar Ranger v. Global Experience Specialist, 2016 WL 3636941)

The validity of the arbitration provision in the UPS terms and conditions was considered by the Eastern District of California. The Court considered the procedural and substantive unconscionability of the program. The Court held that because it was offered on a “take it or leave it” basis, the agreement was procedurally unconscionable but offset by the lack of surprise. While parts of the terms were substantively provisions regarding claims subject to arbitration, discovery, fees, costs, and remedies were not. The Court concluded that it was a valid arbitration clause. (Moule v. UPS, 2016 WL 3648961)

The Middle District of Florida upheld the preemptive effect of the Carmack Amendment. The Court dismissed plaintiff’s claim for breach of contract and emotional distress, stemming from a loss to goods during transit and storage. Even assuming the parties executed a separate contract for storage, the motor carrier maintained possession of the belongings from the time they left Plaintiff’s Florida residence until they were delivered to her Connecticut residence the shipment was governed exclusively by the Carmack Amendment. (Lloyd v. All My Sons Moving, 2016 WL 3883195)

The District Court in Massachusetts denied a preliminary injunction but allowed for a trustee process attachment of a potential claim against a motor carrier. Under Massachusetts law if there is a reasonable likelihood that the plaintiff will recover judgment, including interest and costs, in an amount equal to or greater than the amount of the trustee process over and above any liability insurance shown by the defendant to be available to satisfy the judgment the Court can attach the funds before the claim is litigated. (Jofran Sales v Watkins & Shepard Trucking, 2016 WL 3676140)

Broker Freight Payments.The issue of whether a motor carrier can pursue a shipper for freight charges when the contract with the broker precludes such an action was addressed by the Court in the Eastern District of Michigan. The Court held that the motor carrier could have waived that right under the contract and that the shipper could be a third party beneficiary of that contract. While questions of fact remained in this case as to the validity of the contract, the legal issues to be considered if the contract overrides the bill of lading are significant for all. (Drive Logistics, Ltd. V. PBP Logistics, 2016 US DIst Lexis 94392)